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The Effects of Negative Corporate Culture on Ethical Behavior

By Terri Williams ; Updated October 04, 2017

Does corporate culture determine ethics?

Corporate culture shapes every area of an organization, and this includes the ethical behavior of its employees. In a highly-publicized 2012 New York Times op-ed piece entitled, “Why I Am Leaving Goldman Sachs,” an executive director at the firm wrote that the corporate culture of the company was in moral decline and employees were being rewarded for making unethical choices to bolster the firm’s bottom line.But can negative corporate culture really influence individual ethical behavior?

What is a Negative Corporate Culture?

A negative corporate culture, which is also defined by the Ethics Resource Center as a “weak” ethical culture, is one in which the organization does not endorse ethical values. The company emphasizes winning and success over doing the right thing or conducting business the right way. The ERC also states that certain classes of employees are more likely to perceive a company’s corporate culture as being negative than others. For example, non-management employees, union members, younger workers and new hires often view the ethical culture of a business more negatively than management, non-union workers, older employees and the most-tenured workers.

National Business Ethics Survey

The 2011 National Business Ethics Survey, which is conducted every two years by the Ethics Resource Center, provides more insight regarding the relationship between corporate culture and the ethical behavior of employees. According to the survey, the percentage of companies that had weak or negative ethics cultures sharply increased from 35 percent to 42 percent, and the percentage of employees who felt pressure to compromise their standards rose 5 points to 13 percent since the last survey was conducted in 2009. The survey also stated that certain types of misconduct, such as sexual harassment, substance abuse and stealing, in addition to contract violations, health or safety violations and environmental violations, also increased in the past two years.

Retaliation Against Ethical Behaviors

Certainly one way of influencing ethical behavior is to retaliate against employees who report unethical behavior within their companies. The ERC study found that among whistleblowers, 64 percent said they were excluded from decisions and work activity by management or their supervisor. Another 62 percent reported verbal abuse by management or their supervisor and being given a cold shoulder by other employees. In addition, over half of the respondents almost lost their jobs, were not given a promotion or raise or endured verbal abuse by other employees, according to the survey. Other whistleblowers reported being relocated or reassigned, demoted or having their pay or hours cut. Some even said they experienced online harassment, physical harm to themselves or property or were harassed at home.

Effects of Personal Ethical Code

The University of Washington’s Foster School of Business conducted two studies in which participants were asked to classify the general nature of business as either moral or immoral. Then, they were given tasks to perform for a fictional company, including the opportunity to inflate an insurance claim. Each test subject received a welcome memo from the CEO either stating that the firm would do whatever was necessary to remain competitive or that the company would operate with integrity. Study results showed that individuals who thought that businesses were inherently immoral were less likely to cheat on the insurance claim even after they read the more assertive memo, while those who viewed businesses as moral were more inclined to cheat on the insurance claim after reading the CEO’s admonition to do whatever was necessary to be competitive. According to the study’s author, business ethics professor Scott Reynolds, to push someone over the limits of ethical behavior, “it takes personal belief plus a culture or context that supports and encourages it.”

About the Author

Terri Williams began writing professionally in 1997, working with a large nonprofit organization. Her articles have appeared in various online publications including Yahoo, USA Today, U.S. News & World Report University Directory, and the Center for Digital Ethics and Policy at Loyola University Chicago. Williams has a Bachelor of Arts in English from the University of Alabama at Birmingham.